Travel Agents Reject CAR Options for New Bonding Arrangements

In a survey of travel agents by Irish Travel Trade News, 100% of respondents said that the Commission for Aviation Regulation (CAR) has failed to explain why Lowcostholidays.ie was bonded for just €79,243; 50% said that the Department of Transport should replenish the Travellers’ Protection Fund, while 50% said the travelling public should do so; and 61% rejected all three options presented by the CAR for possible new bonding arrangements.

Just before Christmas, Irish Travel Trade News asked travel agents three questions about the Lowcostholidays.ie bonding level, replenishing the Travellers’ Protection Fund, and options for implementing the new EU Package Travel and Linked Travel Arrangements Directive. Twenty travel agents from all four provinces responded to the survey.

Q1: Lowcostholidays.ie Bonding Level

In July 2016, when the Spain-based tour operator Lowcostholidays collapsed, its Irish subsidiary was bonded by the Commission for Aviation Regulation for just €79,243. However, some 4,200 Irish customers lodged claims with the CAR and, as a result, a total of €3.26 million (65% of the €5 million in the account) had to be drawn down from the Travellers’ Protection Fund.

ITTN asked: Do you think that the Commission for Aviation Regulation has adequately explained why Lowcostholidays.ie was only bonded for €79,243?

100% of respondents replied ‘NO’.

The following additional comments were made:

“I don’t recall any of this coming before the Public Accounts Committee or it being reported that a Government-run Department threw away €3.26 million to what could only be described as pure inefficiency at best!”

“Whoever approved and signed off on that figure needs to be held accountable. Who was reviewing their so-called management accounts?”

“The Irish people, never mind the Irish travel industry, deserve an explanation as to how a company given a licence goes bust less than nine months later.”

“Is a criminal case being pursued by any persons for what is a clear case of fraud? Is the Irish Government in contact with the administrators?”

“The Department have not explained how Lowcostholidays.ie were under bonded. They need to give a full account of what happened. Otherwise the only conclusion is that the CAR were responsible.”

“The CAR don’t need to – we know the real answer is that they were asleep at the wheel, too busy issuing licences (pieces of paper) to be able to police the market sufficiently. Saying someone in the trade should have told them is like saying someone should have woken me up!”

“A bond of €79,243 would represent a licensable turnover of less than €2 million for the year and, assuming an average holiday price of €500 per person, that would mean that Lowcostholidays.ie were licensed to carry approximately 4,000 passengers in 2016. That low bond level should have been questioned or raised an alarm with the CAR. Perhaps they sought and got clarification from Lowcostholidays? It would appear that someone in Lowcostholidays submitted these figures and told the CAR they were correct when clearly they were massively understated.”

“We would like to know what action has been taken by the CAR against the auditors of Lowcostholidays.ie, who would have certified that the company had a licensable turnover of less than €2 million per annum.”

‘It would seem that there are still many questions to answer, with the collapse of Heffernan’s Travel in Cork as an example.”

Q2: Travellers’ Protection Fund

ITTN also asked: Who do you think should contribute to the restoration of a substantial Travellers’ Protection Fund: travel agents, tour operators, or the Department of Transport/Commission for Aviation Regulation?

50% of respondents said the Department of Transport, and 50% said the travelling public.

The following additional comments were made:

“The Department of Transport should pay. The Travellers’ Protection Fund was wiped out because of the failure by the Commission for Aviation Regulation to ensure that Lowcostholidays.ie was bonded sufficiently. The travel trade should not have to pay for the failures of a Government Department.”

“It is the beneficiaries of any insurance scheme that should pay, i.e. those who travel.”

“The customer has to pay for consumer protection and be levied accordingly.”

“The Department of Transport should be required to reimburse the Fund, but ultimately it will be the Irish people and, failing that, the trade based in Ireland.”

“I don’t see why travel agents and tour operators should carry the can for regulatory failings that they had nothing to do with.”

“The travelling public should contribute by way of a levy or tax.”

“A levy on all pax’s departing from Ireland would be the best solution and applied by the airlines and ferry operators.”

“The only persons who ever pay for screw-ups like this are the little people – the end users or tax payers. It will be the end users, through a levy or tax, that ultimately pay for this.”

“The travelling public – through a tax on departures or when purchasing travel tickets.”

“As the Commission failed to monitor the situation, it is not the responsibility of the trade to pick up the pieces.”

“I don’t see why the compliant travel trade or holidaymakers, who were innocent parties in what appears to be a fraud, should be asked to pay to replenish the TPF. Also, lots of consumers travel outside the protection afforded by the bond, so why ask only those consumers who book with the travel trade to pay to replenish the TPF? It appears that the Regulator was misled and the TPF was required to bail out the under-bonding issue, so the Department should re-finance the Fund and put procedures in place to ensure that this does not happen again.”

“The share of building up the fund should be spread – with a small levy on each traveller, a bond for travel agents such as we have now, and a tour operators’ escrow fund.”

“The travelling public should pay and this payment should be applied equally to all customers regardless of the entity that processed their booking.”

“The Department of Transport, in the form of a departure levy to protect outbound and inbound travellers and airline failure.”

Q3: EU Package Travel and Linked Travel Arrangements Directive

The 2015 EU Package Travel and Linked Travel Arrangements Directive, which extends the protections previously provided by the 1990 EU Package Travel Directive (which was implemented in Ireland via the Package Holidays and Travel Trade Act 1995), entered into force on 31st December 2015 and became applicable EU-wide from 1st July 2018.

The Department of Transport, Tourism and Sport issued a Draft SI but has still not published the final Statutory Instrument that will implement this new EU Directive. When it does so, the Commission for Aviation Regulation has said it will undertake another round of consultation with travel agents. In the first round (after the Draft SI was published) the CAR put forward five options on future bonding and how to replenish the much-depleted Travellers’ Protection Fund.

Option A, which would have involved 200% travel agent bonding, 100% tour operator bonding, and no one-off or on-going levy, was considered to be a non-runner. So too was Option B, which would have retained the existing 4% and 10% bonding but would have introduced a 2.5% one-off levy and 0.2% on-going levy for tour operators. So the next round of consultations will consider options C, D and E:

Option C would retain the 4% and 10% bonding but would introduce a 0.35% one-off levy for tour operators and travel agents, plus a 0.03% on-going levy for tour operators and travel agents.

Option D would double the existing bonding levels to 8% and 20%, but redefine projected licensable turnover to exclude payments passed on to suppliers immediately and bills paid in arrears – and would also adopt the 0.35% one-off levy and 0.03% on-going levy for tour operators and travel agents.

Option E would also double the existing bonding levels to 8% and 20%, and redefine projected licensable turnover to exclude payments passed on to suppliers immediately and bills paid in arrears, but would reduce the levies to a 0.25% one-off levy and 0.02% on-going levy for tour operators and travel agents, but would also require that firms could not exceed their projected turnover and must identify at the point of sale to consumers whether they would be eligible to claim.

ITTN asked: Which of these three CAR Options would you prefer: Option C, Option D, or Option E?

61% of respondents answered ‘None of the Above’, 28% said Option C, 11% said Option D, and 0% said Option E.

Of the 61% who said ‘None of the above’, four then cited Option C as the ‘least worst’ option, one cited Option D, and none cited Option E.

The following additional comments were made:

“None of the above. The CAR has started at the end and worked backwards. As with all public service enterprises, it starts with what is easiest for them, then makes it more complicated than necessary and then asks the interested parties what they think about it – before totally ignoring whatever we say.”

“I don’t agree with the way that the options have been presented.”

“As a small agency with its bond in the form of cash, it would hurt financially if D or E came into place. Besides, I think it would be nigh-on impossible to measure these options.”

“Option C is the best of a bad lot.”

“Option D. As a corporate travel agent, where my outgoings 100% precede my incomings (i.e. always paid in arrears), this is a no-brainer.”

“None of the above. It is totally unfair that the travel trade is being asked to pay for this mess. If forced, Option D.”

“Any one-off levy is simply going to make holidays and travel booked via licensed travel agents and tour operators more expensive and less competitive. The trade should not be asked to fix a problem not of their making. The Department of Transport should replenish the Fund – if they have to find the money that will probably ensure the veracity of future applications.”

“I am not sure that any of them will solve the problem – if I have to choose, probably Option C.”

“Any attempt to raise either the bond or levies is not acceptable. Travel agents should not have to pay for the Commission’s negligence. Existing arrangements should continue, with the shortfall coming from the Commission’s budget.”

“The Commission should act as a watchdog for the entire Irish travelling public, regardless of where they book. As a policy, the CAR ignores the financial protection of about 80% of the Irish travelling public. This is inherently wrong. It is akin to the Garda Ombudsman deciding that they would only act on events that occurred in Garda custody!”

“Levies to replenish the Travellers’ Protection Fund will not be necessary if the shortfall is replenished by the Government.”

“None of the above. Scrap the whole licensing and bonding system altogether. Build a small percentage into the fare, rate or, if packaged, the total cost and create a large financial safety net. If agents and operators decide to create their own individual guarantees, be it independently or collectively, then that’s fine too. Credit card issuers can also play a part, as well as travel insurers.”